Are Some Clients More Equal than Others? Evidence of Price Allocation by Delegated Portfolio Managers
Indiana University - Kelley School of Business, Department of Finance
Ryan D. Israelsen
Indiana University Bloomington - Department of Finance
November 13, 2013
We use daily trades of management companies on behalf of their institutional clients to provide direct evidence of strategic price allocation. Focusing our attention on a subsample of "bunched trades" – a management company’s trades of the same stock, on the same day, in same the direction, for more than one client – we find that some clients receive systematically better prices than others. Average magnitudes can be as large as 0.50% of dollar trade volume. Analysis within management companies reveals strong evidence of persistence in price allocation. Finally, we explore the characteristics of management companies likely to engage in price allocation and the clients likely to be involved. To the best of our knowledge this paper is the first to use trade-level data to investigate channels for strategic performance allocation.
Number of Pages in PDF File: 51
Keywords: price allocation, strategic performance allocation, delegated portfolio management, subsidization
JEL Classification: G20, G23working papers series
Date posted: October 1, 2013 ; Last revised: November 14, 2013
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